Global banks that ship increasingly sensitive and sophisticated work overseas to save costs will be forced to step up oversight of back office operations after industry scandals point to lapses involving offshore units in India.

Global banks that ship
increasingly sensitive and sophisticated work overseas to save
costs will be forced to step up oversight of back office
operations after industry scandals point to lapses involving
offshore units in India.

What started a decade ago as call centers staffed by young
Indians faking Western accents to sell credit cards and field
routine queries has grown into a core function for banks,
handling work from risk and fraud management to finance and
accounting.

The New York state banking regulator's accusation this week
that London-based Standard Chartered hid $250 billion
in transactions with Iran and did not give proper oversight to
its back office operation in Chennai, India, underscores the
perils of shipping sensitive work to far-flung locations.

"When you offshore, the biggest challenge is not at the
offshore end but it's on the onshore end and the management of
the offshore operations. And these companies are underinvested
in that," said Bundeep Singh Rangar, chairman of London-based
IndusView Advisors.

"If they don't put (in) enough oversight, governance
procedures and practices, then you will have a problem with the
satellite center, whether that is located onshore or offshore,"
said Rangar, whose firm advises foreign companies, including
technology firms, on doing business in India.

Drawn by an English-speaking population and wages that can
be one-fifth those in the West, more than three-quarters of
global banks have a direct or third-party offshore presence in
India.

Bank of America Merrill Lynch, Barclays,
Goldman Sachs, HSBC, JPMorgan and RBS
are among financial giants employing thousands in India.
These wholly owned offshore operations, running around the
clock, are known as "captive" centers.

Financial firms such as Citigroup, Credit Suisse
and Aviva are among the biggest clients of
Indian IT giants such as Infosys, Tata Consultancy
Services and Wipro.

The New York regulator rapped Standard Chartered for
"outsourcing of the entire OFAC compliance process for the New
York branch to Chennai, India, with no evidence of any oversight
or communication between the Chennai and the New York offices."